HMC
Honda Motor Co., Ltd.
$30.28
Cyclical & Capital-Intensive
80%
Normalized Earnings × Cycle Multiple
Strong
·
Conviction
Overvalued
Trading 50.4% above fair value
You pay
$30.28
Bear
$12.38
Fair
$20.13
Bull
$27.87
Bear
$12.38
-59.1%
$2.51 × 7x + net cash
Fair
$20.13
-33.5%
$2.51 × 10x + net cash
Bull
$27.87
-8.0%
$2.51 × 12x + net cash
Key Value Driver
Through-cycle normalized EPS ($2.51)
Implied Market Multiple
12.0x
Summary
Our base-case estimate uses Normalized Earnings × Cycle Multiple. We then blend that result with the average analyst price target of $31.51 from 18 analysts, using a 25% weight on analyst consensus. That produces an estimated intrinsic value of $20.13 per share.
Warnings
This company has a built-in lending arm whose debt is mixed in with the main business. We capped the debt adjustment to avoid overstating what the core business owes.
Price-to-book value of 0.6x is below the typical low point. This could be a bargain, but check whether asset write-downs are coming.
Wall Street's average price target is $31.51 (from 18 analysts). Our estimate is 48% below the consensus -- consider that gap carefully.
Financial statements were converted from JPY into USD using USDJPY at 0.0061 USD per JPY.
Key Risks
- Standard 10-year DCF produces unreliable terminal values for cyclicals
- 'Cheap' P/E at cycle peak is the most common value trap — normalize first
- Captive finance subsidiaries have different risk profiles from manufacturing